- Markets keenly await the statement by Fed chairman Bernanke at Jackson Hole, due at 1500BST/0900CDT.
- EU plan is said to give ECB sole power to a grant banking license.
- RANsquawk European Morning Briefing Video: http://youtu.be/giCBRMZk2fY
European equity market are trading at their best level of the session as markets look ahead to the key Jackson Hole symposium where Bernanke is due to give his speech at 1500BST (0900CDT). Added to this anticipation has been comments from an EU official who said that there is an EU plan to give ECB sole power to grant banking licenses, which is a step towards 'beefing up' the ECB's oversight role. Ahead of next week ECB press conference there has also been a lot of speculation about the widely anticipated bond buying plan, with comments from ECB member Coeure adding to this morning's optimism after announcing that the ECB is working on a bond buying program.
In the FX markets, the USD-Index sits lower with flows away from safe havens ahead of Jackson Hole. Some expectation of QE from the Fed chairman has seen weakening in the US currency, aiding moves higher in EUR/USD and GBP/USD as they trade at session highs.
As already noted the key event today will be Bernanke shortly after the Wall St. opening bell. Alongside the Fed chairman, BoE member Posen is to deliver his final speech as a member of the MPC with his terms due to end today, plus Chicago PMI and the final reading of Uni of Michigan for August are due at 1445BST and 1455BST respectively.
Overnight the Japanese manufacturing PMI for August came in lower than the previous reading, with national CPI for July lower than expectations and industrial production printing a contraction of 1.2% against the expected growth of 1.7% for the month-on-month reading. (RANsquawk/Newswires)
Japan's government is planning to suspend some state spending as it could run out of cash by October, with a deficit financing bill blocked by opposition parties trying to force Prime Minister Yoshihiko Noda into an early election. (Telegraph)
Fed watcher Jon Hilsenrath has written ahead of Fed chairman Bernanke's speech at Jackson Hole that Bernanke must once again address whether there is more the Fed can do to get the economy going and whether it is worth taking chances on controversial new programs. All along he has argued these efforts are worth it and appears likely to stick to that line in his speech. (WSJ)
EU & UK Headlines
EU plan said to give ECB sole power to grant banking license according to an EU official. (Newswires) The ECB could make bank closure recommendations and national regulators would keep power to close banks under plan. The EU plan is said to let ECB choose banks for direct oversight and EU banking plan gives ECB overreaching oversight.
ECB's Coeure says the ECB is working on a bond buying program. (Newswires) Coeure said the ECB is studying ways of intervening in the short-term bond market based on strict conditionally and EFSF/ESM programme. These comments from Coeure come ahead of the ECB press conference next week where the ECB are widely expected to reveal certain aspects of their bond buying plan.
BoE's Posen said the BoE should consider buying other assets than gilts, and said it is premature to judge the funding of the BoE's lending program. (Newswires) Posen also said that the BoE is right to be open to more asset purchases if needed by the economy, and should look to buy corporate bonds or securitized business loans to more directly address the shortfalls in the British credit system. BoE MPC member Posen leaves his post at the end of today.
European equity markets are trading higher at the mid-point and heading into the US market open, boosted by sentiment ahead of Jackson Hole and following comments from an EU official who noted that there is an EU plan to give the ECB sole power to grant banking license. All 10 major sectors are trading higher, with particular strength noted in financial following this report, with Italian bank Monte dei Paschi (+7.5%) the best performing in Europe.
Smaller capped German stock Rhoen-Klinikum has once again see volatility in today's session following comments from the German cartel office who said Asklepios had filed an intention to tie up with the company for anti trust scrutiny. Rhoen have been getting a lot of attention in recent days and weeks, with sensitive price action as investors await a decision from Fresenius on whether they will launch a takeover bid.
EUR/USD has benefited from a weak USD today so far with moves lower in the US currency the main driver. Upside in the pair has also been supported by talk of an Eastern European name on the bid on the break above 1.2550, and buying ahead of the hourly fixings. To the upside in the pair there is a touted option barrier at 1.2600, and this level is also a vanilla option expiry for today's 10am NY cut (1500BST).
GBP/USD, in similar response to EUR/USD, has seen upside and trades at the best level of the day. Overnight comments from the outgoing BoE MPC member Posen who said that the BoE should consider buying other assets than gilts were overshadowed as Bernanke takes the spotlight later today. EUR/GBP trades in minor positive territory today, supported by talk of EU sovereign names buying in the pair.
USD/JPY trades lower on the session however the pair has seen gains during the European morning session. Weakness in JPY is seen with flows away from safe havens as with attention paid to an article in UK press which noted that Japan's government is planning to suspend some state spending as it could run out of cash by October. USD/JPY trades in close proximity to an option expiry at 78.50 and at 78.40 for the 10am NY cut (1500BST).
Crude futures have benefited from the renewed optimism across asset classes this morning and from the weak USD-Index which trades lower by almost 0.5%. A report out yesterday from the UN nuclear watchdog, the IAEA, who noted Iran had doubled their uranium-enrichment centrifuges to 2,000 since May. This increased tension has also added to upside in crude markets, although as the storm threat from Isaac has now nearly fully diminished, further upside looks limited.
In the precious metals gold is benefiting from speculation of QE from the Fed chairman at Jackson Hole later on. Despite this strength in gold, palladium is outperforming as Lonmin labour talks remain suspended until Monday. It is worth bearing in mind that at the pit close today Heating Oil & RBOB September futures expire, although the volume has already now rolled into the October contract.
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